Opinion: It's just another tax we have to pay. And to no greater end than raising more money so more can be spent

Hotel taxes are a depressingly familiar sight for travellers across Canada — even Airbnb customers have to pay them these days — as governments always find new sources of revenue hard to resist.iStockphoto

What? Not the most convincing travel pitch? Then why are so many Ontario cities hopping on board the hotel-tax bandwagon?

Two years ago, Ontario’s former Liberal government gave municipalities the ability to levy municipal accommodation taxes, with the proviso that at least half the revenue be allocated to local tourism-marketing boards. The new tax has proven an attractive proposition and numerous cities both big and small are now getting a four-per-cent cut of local hotel bills: Ottawa, Sault Ste. Marie, London, Toronto, Kingston, Windsor, Barrie, Brockville, Huntsville, North Bay and Oakville. More are on the way. The seven municipalities that make up Waterloo Region in southwestern Ontario, for example, are in the midst of instituting a common hotel tax across their entire region.

Hotel taxes are a depressingly familiar sight for travellers across Canada — even Airbnb customers have to pay them these days — as governments always find new sources of revenue hard to resist. Two additional factors explain their sudden explosion in Ontario.

First, these are taxes paid by other people. “The accommodation tax only impacts travellers and visitors,” a staff report from the City of Cambridge, in Waterloo Region, helpfully observes. “This means that residents will benefit from this program through new programs or lifestyle enhancements without having to pay for it through property taxes.” For city councillors, it’s like getting something for free — new revenue without any unpleasant squawking from local voters.

Second, there is an ongoing tourism-marketing-board arms race. The annual budget of the Waterloo Region Tourism Marketing Corp., for example, will more than double once it gets its hands on its share of the $3.2 million the local hotel tax is expected to rake in. Such a boost, tourism officials claim, is a matter of survival since nearby cities are similarly upsizing their marketing budgets — fuelled by their hotel taxes — in an effort to lure away conferences, sports tournaments and other lucrative tourism events.

Any city without a hotel tax now claims to be at a competitive disadvantage as neighbouring tourism-marketing boards set about poaching potential visitors. The only way to prevent a devastating tourism gap, the logic goes, is to match your competitor’s marketing budget, paid for with the proceeds of a new hotel tax. And this is no big deal since local residents won’t have to foot the bill.

Unfortunately, there are a few bugs in this bed.

Most of it is just shifting dollars around from one place to another'

Tony Elenis, president of the Ontario Restaurant Hotel and Motel Association

While it’s true no local oxen get gored by hotel taxes, it’s certainly not painless for residents. Travel to another city for a conference or sports tournament and you’ll have to cough up an extra four-per-cent of your bill for the benefit of a rival city’s tourism-marketing board. So everyone pays in the end. Plus, as every major centre in Ontario either has a hotel tax or is in the process of getting one, the overall competitive impact on the tourism business is likely to be nil.

According to Statistics Canada, out of the 53-million Ontario hotel stays in 2016, over 39 million — or three-quarters of the total — were by Ontario residents. So even if every local marketing board in the province doubled its budget overnight, nothing of real consequence will be gained if they’re simply luring tourists away from other parts of the province.

“From an all-Ontario point of view, there’s not much more money coming into the province,” admits Tony Elenis, president of the Ontario Restaurant Hotel and Motel Association. “Most of it is just shifting dollars around from one place to another.” His organization argued strongly against the hotel-tax proposal in 2017, preferring a voluntary destination-fee model. Since that battle is now lost, Elenis spends his time pleading with the provincial government to impose a cap on the tax to prevent it from rising above four per cent.

Unless the sudden growth in municipal tourism-marketing board budgets across Ontario attracts new travellers from outside the province or country, there’s nothing free or beneficial about the hotel tax. Life may become very pleasant for anyone associated with a tourism-marketing board, but for the rest of us Ontarians, it’s just another tax we have to pay. And to no greater end than raising more money so more can be spent.

During the Cold War, the United States and Russia held Strategic Arms Reduction Talks once they realized it made no difference if they had 10,000 nuclear warheads each, or 5,000. The relative balance of power was unchanged. Perhaps its time for Ontario politicians to open their own Strategic Tourism Marketing Board Reduction Talks. There are no winners in this arms race either.

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